Apple Inc & Microsoft

Outline the factors that contribute to a business’s financial position. Explain how using financial information can help a business with its financial management

Financial position is the state of and the relationships among the various financial data found on a firm's balance sheet. Factors which contribute to a business’s financial position include sources of funds, financial considerations, and comparison of debt and equity financing.

Sources of funds are used to operate a business. Without sources of funds a business will not be able to operate as costs will not be able to be paid for. It can be divided into two main categories known as internal and external funds.
Internal funds are those which from within the business. It may be capital contributions by the owners, known as owner’s equity and it may also come from successful operations of the business also known as retained profits. An example of profits being retained can be seen through Apple Inc. Whereby its retained earnings growth percent increases due to the growth which is accompanied by subsequent increases in sales and profitability. Apple’s retained profit shows that by March 1st its retained profit was at 11.38% and by December 9th of the same year its retained profit shot up to 54.36%. These statistics show that the business did it’s research in order to sell its product otherwise the retained profits would not have been so large especially in a short amount of time. This would no doubt help the business’s financial position as it is money that can easily be converted to cash if ever the business gets into debts it can not handle.
External funds come from outside the business and are used to fund when there are insufficient retained profits. There are two types of external borrowing methods, short and long term borrowing. Short term borrowing is used by a business experiencing temporary liquidity problems and/or a business looking to invest in projects where the sum invested will be...